An Acquisition Of Angie's List 'Still Makes Sense'

Despite 13 months having passed since Angie's List Inc ANGI rejected the acquisition bid from IAC/InterActiveCorp IAC and 10 months since Angie’s List announced a revamp of its subscription model, Loop Capital’s Blake Harper still believes an acquisition or partnership would make sense for the company.

Harper reiterated a Buy rating on Angie’s List, with a price target of $12.

It Makes Sense

“We estimate a combined Angie's List and HomeAdvisor (owned by IAC) could generate over $160 million in adjusted EBITDA in 2017 given the current trajectories of each business as well as marketing and other cost synergies,” the analyst mentioned.

Angie’s List had hired bankers to explore opportunities, and Harper believes the new board, which includes two new members and an activist investor, would be more open to acquisition talks in 2017.

In addition, the business model changes have “accelerated membership sign ups, user engagement and service provider additions in Q3, and should translate into revenue and earnings growth acceleration in 2017,” the analyst stated.

Increasing Competition

Harper believes competition was only going to intensify going forward, given that Amazon.com, Inc. AMZN had announced in November it was expanding Amazon Home Services to 20 new markets, including Indianapolis.

HomeAdvisor has also expanded to a second office in Indianapolis and has hired several top sales people from Angie’s List.

“While the market is still very large and fragmented, Angie's List could find its turnaround plans more challenging to execute as rivals gain momentum and it could benefit from the technical and product resources of a larger technology company,” the analyst pointed out.

This is why a “strategic partnership with a home improvement retailer or other online home services company may also make sense for the company.”